PBOC Steps Up Lending Support for Companies Fighting Virus
China’s central bank expanded companies’ access to cheap loans Monday from six major state-owned lenders through a special relending program in a move to bolster businesses struck by the deadly coronavirus.
The People’s Bank of China told the country’s biggest banks to provide low-interest loans to selected companies shortlisted by 10 provincial and municipal governments, using a 300 billion yuan ($42.6 billion) special relending fund set up Feb. 7 to support companies involved in fighting the Covid-19 epidemic.
The order means more companies are now eligible to get low-interest loans from the country’s biggest banks — the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and the Postal Savings Bank — under the special relending project, according to a notice from the People’s Bank of China.
Previously, only companies on a national list picked by the National Development and Reform Commission and the Ministry of Industry and Information Technology could access the cheap funding from the state lenders.
The central bank’s move comes as the country steps up efforts to encourage businesses to resume operations after nearly a month of suspended activities to control the spread of the Covid-19 virus, which has sickened more than 77,000 people in China.
Pan Gongsheng, vice governor of the PBOC, pledged earlier this month that the central bank would use multiple policy tools such as targeted reserve requirement cuts, relending and rediscount to offset the outbreak’s damage to the economy and support key sectors.
Banking industry sources said the change will encourage lenders to issue loans under the relending project and improve the speed and effects of the policy designed to support disease control.
China’s Ministry of Finance, along with four other central government departments, announced the 300 billion yuan special relending quota Feb. 7 as “lifesaving funds” to support companies engaged in production of medical supplies and necessities for life. Under the project, the PBOC would provide cheaper funding to commercial lenders, which were told to cap their rates on loans for selected businesses at 3.15%, 1 percentage point lower than the latest loan prime rate (LPR).
Under the original plan, 200 billion yuan of the fund would be granted to the six state lenders and three policy banks, which would be able to loan the funds only to companies on the national list. The list included 1,600 companies as of Saturday, up from the original 134 after several expansions.
The remaining 100 billion yuan was allocated to dozens of regional lenders in 10 provinces and municipalities including Beijing, Shanghai, Hubei, Guangdong and Zhenjiang. The smaller banks can lend the money to selected companies handpicked by local governments.
As of Monday, the central bank issued 100 billion yuan of relending funds to commercial banks, which have issued more than 50 billion yuan of loans to companies.
An executive at a large state bank’s provincial branch told Caixin that after the expansion, local branches will need to report to both their headquarters and the central bank’s local office about their use of the relending fund.
A central bank official said the national and provincial lists of candidate companies only play a reference role for banks and the lenders still need to carry out their own due diligence on borrowers’ quality. Banks will bear the losses themselves if loans turn sour, according to the official.
Contact reporter Han Wei (firstname.lastname@example.org) and editor Bob Simison (email@example.com)
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